Wednesday, November 19, 1997

SEC to meet Friday with stock markets on circuit breakers

By PAUL BECKETT / Dow Jones News Service

SAN ANTONIO, Texas (Dow Jones News) -- The Securities and Exchange Commission will meet Friday with stock markets and self-regulatory organizations to discuss the future of market circuit breakers, which interrupted trading for the first time on Oct. 27, according to people invited to the meeting.

The meeting marks the SEC's first coordinated discussions on the effectiveness of the circuit breakers after they stopped trading for 30 minutes when the Dow Jones industrial average fell 350 points and then shut down trading for the day when the index fell 550 points.

No one at the SEC was available for immediate comment, but representatives from the American Stock Exchange and the New York Stock Exchange said they had been invited to attend by the SEC's division of market regulation.

SEC Chairman Arthur Levitt has said the effectiveness of the circuit breakers needs to be looked at to determine whether the trigger numbers are too narrow, given the Dow industrials' sharp rise in recent years.

The circuit breakers were introduced following the stock market crash in October 1987 and were aimed at calming anxiety and letting cooler heads prevail in a market rout.

But regulators and stock market officials have questioned the effectiveness of the circuit breakers, and some suggest that the trading halt merely triggered more sales.

Among the issues the SEC is considering is whether to base the trigger drops on percentages of the Dow Jones industrial average. While instant percentage figures could lead to confusion, the SEC is mulling a percentage-based benchmark that could be set periodically to yield a fixed trigger number.

Stephen Storch, executive director of government relations for the American Stock Exchange, said at the annual meeting of the North American Securities Administrators Association here that the SEC's meeting comes amid heightened interest in Washington over how the circuit breakers work.

A Senate banking subcommittee is expected to hold hearings on the circuit breakers when Congress returns early in the new year.